Bids are due end Sept, with final announcement planned for end Nov
CAIRO: Of the six finalists announced by the Central Bank (CB) on Friday, Commercial International Bank (CIB) appears to have emerged as a leading candidate for the acquisition of the Bank of Alexandria (BoA), say local banking analysts.
Bids are due for submission by the end of September and the winner of the 75-80 per cent stake in the bank offered for sale will be announced by the end of November, the Ministry of Investment and CB said in a joint statement. Another 5 per cent of shares will be allocated to employees and 15-20 per cent will be floated on the CASE.
CIB has a strong local presence, says EFG Hermes analyst Marwa El-Sheikh. Bank of Alexandria represents a natural development in the growth of that presence. That s why many expect them to make a strong offer.
Naeem Holdings analyst May El-Haggar agreed, adding CIB simply has more motivation to achieve the growth demanded by CB of the future owner for BoA.
In order to stay in the lead like they (CIB) were a few years ago, they must expand their network of branches, says Naeem Holdings analyst May El-Haggar. So they are seen as the candidate with the most incentive to develop the Bank of Alexandria.
The finalists list includes two consortia: Jordan-based Arab Bank Group and the Arab National Bank of Saudi Arabia, and Dubai-based Mashreq Bank and Dubai Investment Group. Egypt s CIB, France s BNP Paribas, Italy s Sanpaolo IMI, and Greece s EFG Eurobank, round out the list as individual bidders. Noticeably absent were two banks previously-thought to have strong interest in BoA: HSBC and Barclays, BoA s original owner before it was nationalized in 1957.
In making the call for bids last May, Tarek Amer, CB deputy governor and head of the BoA privatization committee said the main objective of offering the bank for sale was to put it in a position to increase its contribution to the Egyptian economy.
[We want] an institution that has the financial and human resources to manage the bank and protect people’s deposits, Amer said. At the same time, it has to have the ability to develop the bank and help us achieve the economic goals for the state in terms of growth. We know that growth in the private sector helps growth in the national product.
The winner is set to control BoA s estimated 6 per cent market share of customer deposits. BoA s client base of over two million, up from 600,000 in 2002 when an aggressive government restructuring plan placed senior management of all four public banks in the hands of the private sector. New leadership cut down BoA s workforce by more than 15 percent to 7,000 workers at the end of 2005 and increased computer use, but El-Sheikh says much more still needs to be done to increase the efficiency of the institution s operating systems.
The bank needs operational restructuring. It needs a change of operational management. It needs a lot of work, El Sheikh says. Of course, the asset quality is much higher now, but operationally, it profits less than the other public banks.
But in addition to internal restructuring, El-Haggar says BoA simply needs the expertise and the financial muscle of the buyer to expand its number of branches. The bank now operates 188 branches and 104 ATM machines.
The retail banking sector in Egypt is relatively untouched, says El-Haggar. In order to operate effectively, the financial sector needs to rely on a smaller number of banks that must continue to grow to tap into wider segments of the market, she says.
But while HC Securities Analyst Hatem Alaa says it s too early to call out a front runner, he says the serious interest of large banks in the acquisition point to their confidence in the potential for growth in the financial sector.
It s an unprecedented thing for Egypt to privatize a public bank, she says. This is a major change in the way the country and the policy makers think. To see it progress to the point of implementation . It s one of the milestones of the banking sector.